GBP/CAD Suffers Setback as Canadian Economic Growth Data Exceeds Expectations
The Pound to Canadian Dollar Exchange (GBP/CAD) rate has taken a hit today, falling some 0.7% as Canadian GDP beat expectations and optimism over NAFTA gets a shot in the arm.
Economists had expected to see a small rise of 0.1% in GDP growth in July from the previous level of zero, but instead the figure printed at 0.2%.
Whilst still a minor growth rate this proved to be all that was needed to unshackle CAD, allowing it to race ahead of Sterling.
However, there was also some less-good news for Canada, with producer prices in August falling -0.5% against an expected smaller dip of -0.3%. In the end, however, investors shrugged off this fly in the ointment.
NAFTA Optimism also Helps Kick Canadian Dollar into Higher Gear
It wasn’t just better GDP figures that helped the Canadian Dollar (CAD) today, with news that NAFTA negotiations were continuing despite the deadline drawing near, and that the US and Canada could be close to a deal.
Although the deadline for reaching an agreement is 30 September, those familiar with the process indicated that some kind of fudge might be forthcoming which would either enable Canada to remain in the free trade agreement or that the deadline would be extended.
This sentiment was echoed by Bank of Canada Governor Stephen Poloz, who outlined his NAFTA optimism while delivering an upbeat speech about Canadian businesses and the opportunities of digital technology.
Adding more fuel to the Canadian Dollar’s fire has been the price of oil, which has seen a steady rise this week, with Brent prices currently hovering just south of US$82 a barrel.
Pound Slips as Mixed GDP Data and Falling Business Investment Dents GBP/CAD
On the other side of the GBP/CAD pairing, the Pound trimmed its losses today as the release of the latest UK GDP data revealed an as-expected Q-on-Q rise of 0.4%.
While this may have been in line with forecasts GBP investors were nevertheless disappointed to see the annualised rate fall below expectations, coming in at 1.2% against a predicted 1.3% rise. In addition, Q1 growth was revised down to 0.1% after accounting for VAT receipts.
Further shaking investors’ confidence in the UK economy were some rather disappointing business investment figures, with Q2 levels reported to have fallen by 0.7% against expectations of a rise of 0.5%.
GBP/CAD Exchange Rate Outlook: UK PMIs Could Pile on More Pressure for the Pound
Looking ahead to next week, the Pound could come under pressure in the first half of the week when the UK’s latest PMI figures are published. Analysts currently predict that growth will have continued to slow across the UK’s private sector last month – if this is the case then GBP is likely to suffer a further setback.
At the same time, CAD investors will next week be focusing on the publications of Canada’s latest labour figures, with the Canadian Dollar likely appreciating against the Pound if the unemployment rate falls back below 6%, as is forecast.
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